Anglo-Dutch steel firm Corus says it has received a £4.1bn ($7.7bn) takeover proposal from the steel division of Indian conglomerate Tata.
Tata's offer is below the current Corus share price
Corus said that even though Tata had made a proposal, there was no certainty that a full offer would now follow.
If a deal went ahead, it would be the largest Indian takeover of a foreign company, creating the world's fifth-largest steel firm.
The £4.55-a-share proposed is below the current Corus share price.
In London following the announcement, Corus shares were trading 0.1% lower at 479 pence.
Analysts had earlier suggested that Corus would cost Tata Steel as much as £5.6bn - about 580p a share.
Corus, formed by a 1999 merger between British Steel and the Dutch group Hoogovens, employs 47,300 worldwide including 24,000 people in the UK.
Beside steel, Tata's interests range from carmaking to Tetley's tea.
GLOBAL STEEL PRODUCTION 2005
1. Mittal Steel - 49.89 million tonnes
2. Arcelor- 46.65
3. Nippon Steel - 32.91
4. Posco - 31.42
5. JFE Steel - 29.57
6. Shanghai Baosteel - 22.73
7. US Steel - 19.26
8. Nucor - 18.45
9. Corus - 18.18
10. Riva - 17.53
56. Tata - 4.4
Source: Metal Bulletin
Rapid economic growth in developing countries, including China and India, is creating huge demand for steel and many firms are looking to add to their steel-making assets.
But as Chinese steel production soars, other manufacturers are trying to consolidate so they can cut costs and stay competitive.
Earlier this year, Mittal Steel bought rival Arcelor for $34bn, creating the world's biggest steel maker.
In 2005, Tata Steel was the world's 56th biggest steel producer, and a Corus takeover would represent Tata's first steel business outside of Asia.
The Tata Group as a whole is among India's biggest firms. Besides steel and tea, its operations include utilties, hotels and satellite television.
A recent report from the UN agency Unctad highlighted the growing amount of foreign direct investment by firms in developing countries, which reached $133bn in 2005.